I hear all this about a gold rush until they half in the estimated time of december. Now listen. I got an asic on pre-order that's going to do 40 gh/s. Even after the halfing I still see me going from 38 dollars a day to 19.5 dollars a day profitable. I mean wtf. So what. Profits are cut in half. It's still profit. What am I missing?!

What you are missing is the difference between the concept referred to as "revenue" and the concept referred to as "profit".

Revenues are cut in half. You might be making "good profit" at a BTC/USD $12 when there are 50 BTC per block, but you might be losing your ass at $12 when there are then only 25 BTC per block.

With GPUs, it nearly entirely depends on what your cost of electricity is. If it is low, like $0.07 per kWh or lower, you will likely still be able to mine profitably with GPU even after the block reward drop, but the wildcard is when the ASICs start shipping.

So most of the "be afraid, be very afraid" talk (which I espouse myself) is directed to those mining with GPUs who are continuing to add GPU hashing capacity at this late stage in the game.

The problem with the ASICs is nobody knows how many of the things have been ordered, how man will ship initially and from which manufacturers.

If you were one of the first to order a BFL SC Single back in June you then plunked down 162 BTC for a BFL SC Single (at BTC/USD of around $8) then you don't technically break even on the investment until it has mined 162 BTC plus the cost of electricity (though this is minimal for BFL SC ASICs), plus the cost of capital (if you put that $1,299 in a bank you would have received interest on it so this investment has at least that expense), plus your time, etc.

Now let's say ASICMINER happens to go live first, and difficulty skyrockets by the time you get your BFL SC. You'll probably wish that you still had that 162 BTC because getting to breakeven, could end up being more than a year or more away! That's opportunity cost. You lost the opportunity to hold 162 BTC yet today, and instead you have a claim check for a piece of hardware which is promised to yield 60 Ghash/s.

Or the bet might pay off and you are among the first to get the SC delivered and it ends up being the most profitable investment you've ever made.

The thing is, it is pure speculation at this point either way. Nobody knows how it is going to play out. What is known is that it is now near the end of October (the original shipping estimate provided by BFL) and ASICs don't yet exist for Bitcoin mining (from any manufacturer) as far as anyone can tell.

still, that's pretty good considering that my gpu rig was making decent bitcoins and that was only 2.7 gh/s Still not scared. Please! Somebody scare me!

Here's the scary thing: ASICMINER is a company with ASIC IP that is planning to use it for mining. They can crank out as many ASICs as they want for dollars per chip. They can use this to increase difficulty to tens of billions and probably still make a profit. They will also likely own more than 51% of the network.

still, that's pretty good considering that my gpu rig was making decent bitcoins and that was only 2.7 gh/s Still not scared. Please! Somebody scare me!

Here's the scary thing: ASICMINER is a company with ASIC IP that is planning to use it for mining. They can crank out as many ASICs as they want for dollars per chip. They can use this to increase difficulty to tens of billions and probably still make a profit. They will also likely own more than 51% of the network.

No they can't, for several reasons. First, even if the chips themselves are free there are other costs. They need to pay for the PCB and it's components, power supplies, enclosures, etc. The cost for those components is not insignificant. They are on a 130nm node, and will not be power competitive with BFL (or bASIC). With $0.1/kWh electricity and current BTC prices ($10.67), they would be running at a loss at a difficulty of 600M. That's probably a best case though, since their installation would probably have to be in a large data center and they would have hosting and cooling costs as well.

Even if they could produce 1TH/s for $5000, with $0.10/kWh electricity/cooling cost and 4000W power draw the difficulty for a 1 year break even would be a constant difficulty of 230M.

The capital cost is huge, but the marginal cost shouldn't be too bad. I agree they will probably come down in price, but by then their advantage might be all eaten up since lots of people will have them. It will be an interesting 6 months!

Oops, you're right. I changed that in the wrong spot. That gives an ROI of 11.91 months. BFL is at 35.22 months there.

This just shows that it's still a problem. They have every motivation to push the network to 230M (1.6 THps).

That's only true in my very optimistic scenario. Friedcat has said their cost of electricity is US$0.10/kWh, but that is not the only expense. There would be other hosting costs, including not insignificant cooling costs. They've quoted 4.2GH/J, so 1TH/s would be expected to pull 4200W. If they were to add 1PH/s to the network (adding 140M diff) they would be drawing 4.2MW of power. That is not something you can run in some standard office space. Hell, that would be half the power used by the new Titan Supercomputer at full load. Total cost to run is probably closer to twice what I estimated. Second, $5000/TH/s is probably pretty optimistic when you're talking about building out that kind of infrastructure.